Third-party outsourcing is growing among big and small businesses alike. Outsourcing (or “contracting out”) refers to the practice of hiring a third-party outside a company to perform tasks that are typically done by in-house employees and staff. Jobs affected range from customer support to manufacturing. Outsourcing was recognized as a business strategy in the late ‘80s, and later became an integral part of international business economics throughout the ‘90s.
The most common tasks businesses choose to outsource usually fall into three categories: repetitive, specialized, and expert tasks. Repetitive tasks include data entry, specialized tasks comprise of jobs like IT support, and jobs such as financial analyst fall under expert tasks. One trait these jobs share is it’s not necessary for them to be done in-house.
Businesses can decrease labour and overhead costs substantially by outsourcing tasks such as bookkeeping, graphic design, and customer/technical support. Virtual receptionists can also be outsourced: a remote first point of contact that usually performs the tasks of trained customer support personnel – sometimes round-the-clock – without having to maintain a receptionist’s office. You may have the in-house skills to do it all, but while you handle all the minute details on your own, you might not be able to concentrate on expanding the core areas of your business, which isn’t beneficial in the long run. However, there are downsides to outsourcing as well. It all depends on the needs of your business.
- Cost Advantages: Perhaps one of the most obvious benefits to outsourcing is the cost savings. When you have a good partner, you can get the job done at a lower cost, usually due to the difference in wages (since most of the work is done overseas in places like Asia.)
- Increased Efficiency: When you outsource certain work, you are handing it over to someone with experience and understanding of the job. This leads to an increase in productivity; you’re not just adding these tasks to the bottom of somebody’s to-do list within the office. Access to skilled resources also means faster and better services, depending on your offshore partner.
- Focus on Main Goals: Outsourcing certain tasks means everyone in the office is freer to focus on building your company and brand, as well as investing in development and research to take the steps necessary to expand your business.
- Save on Recruitment/Infrastructure Costs: Outsourcing cuts the need for investments in infrastructure since the responsibility of business processes falls on the partner. You also don’t need to invest in expensive recruiting and training resources for your business.
- Communication Issues: A lack of communication between your company and the outsourcing partner may cause delay in the completion of projects. Different time zones could also contribute to communication problems.
- Risk of Security Breach: If you decide to outsource Human Resources, Payroll or Recruitment, you risk exposing confidential information to a third party.
- Shortcomings in Expectations: If you fail to choose the right partner, incompetence could result in delays and sub-standard quality in output. Add to that the difficulty of regulating these factors outside an office, and it defeats the whole point of outsourcing.
- No Customer Focus: Outsourcing partners may be doing work for multiple organizations, so they may not be completely focused on your business’s tasks.
Before approaching a service provider or outsourcing partner, it’s beneficial to consider all aspects of outsourcing, and whether your company is in a place where it would benefit from its services. Once you have analyzed your company’s requirements, and are confident you would benefit from outsourcing, you can move on to researching a suitable partner. Consider these six elements when searching: reliability, quality, experience, range of services, good communication, and value for money. Don’t just select one that provides the lowest cost. Choosing a successful vendor will lead to first-rate results, doing your company good in the long run.
Helen Jacob | Staff Writer